Families increasingly choose to transfer wealth to adult children and grandchildren during their lifetimes. This approach, known as “giving while living,” lets donors witness the impact of their support. It also reduces the size of taxable estates.
The strategy carries clear risks. Donors must ensure gifts do not undermine their own retirement security. Careful planning is essential before any money changes hands.
Start by setting a firm budget for lifetime giving. Calculate expected retirement expenses, health care costs, and long-term care needs first. Only surplus funds should be considered for gifts.
Consider how gifts affect your children’s financial situation. Large transfers may create tax obligations or disrupt eligibility for need-based aid. Discuss timing and amounts openly with family members.
Annual exclusion rules allow tax-free gifts up to a set limit per recipient. Amounts above that threshold may require filing a gift tax return. Consult a financial advisor to avoid unintended consequences.
Some families use trusts to control how and when gifted money is used. Trusts can protect assets from creditors and provide structured payments. They also keep the donor’s intentions clear.
Document all gifts and keep records for tax purposes. Review the giving plan annually as circumstances change. A regular check-in protects both the donor and the recipients.
